WALNUT CREEK, Calif., Aug. 20 /PRNewswire-FirstCall/ -- Longs Drug Stores Corporation (NYSE: LDG) today reported preliminary income from continuing operations for the second quarter ended July 31, 2008 of $27.5 million, or $0.76 per diluted share, including $0.7 million of after-tax charges, or $0.02 per diluted share, related to provisions for store closures and asset impairments and legal reserves, a 6.8 percent increase compared with income from continuing operations for the second quarter ended July 26, 2007 of $25.7 million, or $0.67 per diluted share.
Second Quarter
Income
Income from continuing operations for the second quarter ended July 31, 2008 was $27.5 million, or $0.76 per diluted share, a 6.8 percent increase compared with income from continuing operations for the second quarter ended July 26, 2007 of $25.7 million, or $0.67 per diluted share. Results for the quarter ended July 31, 2008 included $0.7 million of after-tax charges, or $0.02 per diluted share, related to provisions for store closures and asset impairments and legal reserves.
Revenues
Total revenues of $1.33 billion for the thirteen weeks ended July 31, 2008 were 4.6 percent higher than the $1.27 billion reported for the thirteen weeks ended July 26, 2007.
Retail drug store sales increased 0.5 percent to $1.20 billion for the thirteen weeks ended July 31, 2008. Same-store sales decreased 1.1 percent with pharmacy same-store sales decreasing 0.6 percent and front-end same-store sales decreasing 1.6 percent. Pharmacy sales were 51.6 percent of retail drug store sales during the period, compared with 51.3 percent a year ago.
Pharmacy benefit services revenues increased 66.3 percent to $131.3 million from $79.0 millions
Stockholders' Equity:
Common stock: par value $0.50 per
share, 120,000,000 shares authorized,
35,908,000, 36,204,000 and 37,760,000
shares outstanding 17,954 18,102 18,880
Additional capital 303,982 288,385 283,448
Retained earnings 531,552 521,438 549,482
Total stockholders' equity 853,488 827,925 851,810
Total $1,912,705 $1,846,716 $1,737,615
Condensed Statements of Consolidated Cash Flows (unaudited)
For the 26 weeks ended
July 31, July 26,
2008 2007
Thousands
Operating Activities:
Net income $51,036 $39,645
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 51,436 46,543
Provision for store closures
and asset impairments, net (21) 5,772
Deferred income taxes and other (2,543) (3,968)
Stock awards and options, net 8,793 14,162
Excess tax benefits related to
stock awards and options (1,030) (6,570)
Common stock contribution to
benefit plan 13,784 10,224
Changes in assets and liabilities:
Accounts receivable (68,484) (12,492)
Merchandise inventories 45,777 (5,403)
Other assets (1,674) (2,082)
Current liabilities and other 23,298 (8,044)
Net cash provided by
operating activities 120,372 77,787
Investing Activities:
Capital expenditures (61,332) (67,059)
Acquisitions (4,931) (12,021)
Proceeds from dispositions of property
and intangible assets 941 19,848
Net cash used in investing activities (65,322) (59,232)
Financing Activities:
Proceeds from revolving line
of credit borrowings, net 25,000 8,000
Repayments of private placement notes (2,728) (2,727)
Repurchase of common stock (39,260) (29,994)
Proceeds from exercise of stock options 3,580 13,356
Dividend payments (10,127) (10,614)
Medicare Part D subsidy receipts
(disbursements), net (30,372) (5,937)
Excess tax benefits related to stock
awards and options 1,030 6,570
Other (2,325) (342)
Net cash used in financing activities (55,202) (21,688)
Decrease in cash and cash equivalents (152) (3,133)
Cash and cash equivalents at
beginning of period 27,019 27,596
Cash and cash equivalents at end of period 26,867 24,463
Supplemental disclosure of cash flow information:
Cash paid for interest, net of
amounts capitalized $5,348 $3,476
Cash paid for income taxes 44,663 16,402
Condensed Statements of Consolidated Stockholders' Equity
Thousands except per share amounts
Total
Common Stock Stock-
Additional Retained holders'
Shares Amount Capital Earnings Equity
Balance at January 25, 2007 37,406 18,703 250,113 546,741 815,557
Cumulative effect of
accounting change (Note 2) (526) (526)
Net income 96,201 96,201
Dividends ($.56 per share) (21,183) (21,183)
Stock contributions to
employee retirement plan 278 139 13,296 13,435
Stock awards, net of
forfeitures 144 72 (5,556) (5,484)
Stock-based compensation
expense 19,926 19,926
Stock options exercised 850 425 19,268 19,693
Tax benefit related to stock
awards and stock options, net 10,094 10,094
Repurchase of common stock (2,474) (1,237) (18,756) (99,795) (119,788)
Balance at January 31, 2008 36,204 $18,102 $288,385 $521,438 $827,925
Net income 51,036 51,036
Dividends ($.28 per share) (10,127) (10,127)
Stock contributions to
employee retirement plan 305 153 13,631 13,784
Stock awards, net of
forfeitures 263 131 (2,374) (2,243)
Stock-based compensation
expense 7,137 7,137
Stock options exercised 137 68 3,512 3,580
Tax benefit related to stock
awards and stock options, net 1,656 1,656
Repurchase of common stock (1,000) (500) (7,965) (30,795) (39,260)
Balance at July 31, 2008 35,909 $17,954 $303,982 $531,552 $853,488
in the comparable period last year. Prescription drug plan revenues were $110.9 million compared with $65.7 million last year and pharmacy benefit management revenues were $20.4 million compared with $13.3 million a year ago.Retail Drug Store Gross Profit
Retail drug store gross profit for the second quarter ended July 31, 2008 was $320.2 million, or 26.7 percent of retail drug store sales, compared with $314.5 million, or 26.3 percent of retail drug store sales, last year. The increase in gross profit as a percent of sales was primarily due to higher generic utilization and improved inventory management, partially offset by changes in the sales mix reflecting increasing price sensitivity among consumers.
The LIFO charge for the second quarter ended July 31, 2008 was $4.0 million compared with $2.0 million in the second quarter last year.
Prescription Drug Plan Gross Profit
Prescription drug plan gross profit for the second quarter ended July 31, 2008 was $14.4 million, or 13.0 percent of prescription drug plan revenues, compared with $11.5 million, or 17.5 percent of prescription drug plan revenues, last year. As expected, the lower gross profit margin rate on increased revenues reflects the Company's bids submitted for the 2008 plan year.
Operating and Administrative Expenses
Operating and administrative expenses for the second quarter ended July 31, 2008 were $307.4 million, or 23.1 percent of revenues, compared with $295.0 million, or 23.1 percent of revenues, last year. The flat rate compared with last year reflects increased leverage on higher pharmacy benefit services revenues, offset by increased new store activity and reduced leverage on retail drug store sales.
Operating Income
Consolidated operating income for the second quarter ended July 31, 2008 was $46.5 million, or 3.5 percent of revenues. Operating income for the second quarter last year was $44.3 million, or 3.5 percent of revenues.
Retail drug store operating income was $31.6 million, or 2.6 percent of retail drug store sales, compared with $33.4 million, or 2.8 percent of sales last year. Pharmacy benefit services operating income was $14.9 million, or 11.4 percent of pharmacy benefit services revenues, compared with $10.9 million, or 13.8 percent of pharmacy benefit services revenues last year.
First Six Months
Income
Income from continuing operations for the 26 weeks ended July 31, 2008 was $50.6 million, or $1.40 per diluted share, compared with income from continuing operations for the 26 weeks ended July 26, 2007 of $41.8 million, or $1.09 per diluted share, including $5.8 million of after-tax charges related to the disposition of stores.
Revenues
Total revenues of $2.74 billion for the 26 weeks ended July 31, 2008 were 6.5 percent higher than the $2.57 billion reported for the 26 weeks ended July 26, 2007.
Retail drug store sales increased 1.7 percent to $2.42 billion from $2.38 billion in the comparable period last year. Same-store sales decreased 0.1 percent with pharmacy same-store sales flat with last year and front-end same- store sales decreasing 0.1 percent. Pharmacy sales were 52.0 percent of retail drug store sales during the period, compared with 51.8 percent a year ago.
Pharmacy benefit services revenues increased 66.8 percent to $318.6 million from $191.0 million in the comparable period last year. Prescription drug plan revenues were $278.0 million compared with $162.2 million last year and pharmacy benefit management revenues were $40.6 million compared with $28.7 million a year ago.
Retail Drug Store Gross Profit
Retail drug store gross profit for the 26 weeks ended July 31, 2008 was $645.4 million, or 26.7 percent of retail drug store sales, compared with $618.4 million, or 26.0 percent of retail drug store sales, last year. The increase in gross profit as a percent of sales was primarily due to higher generic utilization, increased self-distribution of front-end merchandise and improved inventory management, partially offset by changes in the sales mix reflecting increasing price sensitivity among consumers.
The LIFO charge for the 26 weeks ended July 31, 2008 was $7.5 million compared with $5.0 million a year ago.
Prescription Drug Plan Gross Profit
Prescription drug plan gross profit for the 26 weeks ended July 31, 2008 was $18.4 million, or 6.6 percent of prescription drug plan revenues, compared with $15.6 million, or 9.6 percent of prescription drug plan revenues, last year. As expected, the lower gross profit margin rate on increased revenues reflects the Company's bids submitted for the 2008 plan year.
Operating and Administrative Expenses
Operating and administrative expenses for the 26 weeks ended July 31, 2008 were $617.0 million, or 22.5 percent of revenues, compared with $581.3 million, or 22.6 percent of revenues, last year. The decrease in the expense rate reflects increased leverage on higher pharmacy benefit services revenues, partially offset by increased new store activity and reduced leverage on retail drug store sales.
Operating Income
Consolidated operating income for the 26 weeks ended July 31, 2008 was $86.0 million, or 3.1 percent of revenues. Operating income for the 26 weeks ended July 26, 2007 was $72.3 million, or 2.8 percent of revenues, including a $9.6 million pre-tax charge related to the disposition of stores.
Retail drug store operating income was $66.6 million, or 2.8 percent of retail drug store sales, compared with $56.8 million, or 2.4 percent of sales last year, including the charge related to the disposition of stores. Pharmacy benefit services operating income was $19.4 million, or 6.1 percent of pharmacy benefit services revenues, compared with $15.4 million, or 8.1 percent of pharmacy benefit services revenues last year.
Management Outlook
In light of the Company's announced transaction with CVS Caremark Corporation, the Company will not be including management outlook during the pendency of such transaction.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements relate to, among other things, expected financial results for fiscal year 2009, capital expenditures, progress on strategic initiatives, opening, relocating and remodeling of stores, profits from prescription drug plans, performance of RxAmerica, and are indicated by such words as "will," "expects," "estimates," "goals," "plans" or similar words. These statements are based on the Company's current plans and expectations and involve risks and uncertainties that could cause actual events and results to vary materially from those contemplated by such statements. Risks and uncertainties relate to, among other things, CVS Caremark Corporation's proposed acquisition of the Company, changing market conditions in the overall and regional economy and in the retail industry, the availability and cost of real estate, construction costs and delays, labor unrest, natural or manmade disasters, competition, maintaining satisfactory relationships with vendors, changes in applicable law or in the interpretation of applicable law by regulatory agencies or by legal, accounting or other professional advisors, or by the Company, and other factors described from time to time in the Company's news releases and in its annual, quarterly and other reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended January 31, 2008. Please refer to such filings for a further discussion of these risks and uncertainties. Undue reliance should not be placed on forward-looking statements which speak only as of the date of this news release. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this news release.
About the Company
Headquartered in Walnut Creek, California, Longs Drug Stores
Corporation (NYSE: LDG) is one of the most recognized retail drug store
chains on the West Coast and in Hawaii. The Company operates 521 retail
pharmacies and offers a wide assortment of merchandise focusing on health,
wellness, beauty and convenience. Longs also provides pharmacy benefit
management services and Medicare beneficiary prescription drug plans
through its wholly-owned subsidiary, RxAmerica, LLC. Additional information
about Longs and its services is available at http://www.longs.com and more
information about RxAmerica is available at http://www.rxamerica.com.
Contact: 925-979-3979
Condensed Consolidated Income Statements (unaudited)
For the 13 weeks ended For the 26 weeks ended
July 31, July 26, July 31, July 26,
2008 2007 2008 2007
Thousands Except Per Share Amounts
Revenues:
Retail drug store sales $1,201,468 $1,195,591 $2,421,113 $2,380,602
Pharmacy benefit
services revenues 131,269 78,958 318,605 190,957
Total revenues 1,332,737 1,274,549 2,739,718 2,571,559
Costs and expenses:
Cost of retail drug
store sales 881,268 881,118 1,775,745 1,762,177
Prescription drug plan
benefit costs 96,500 54,174 259,589 146,670
Operating and administrative
expenses 307,388 295,030 617,049 581,300
Legal settlements and
other disputes, net 500 (431) 500 (431)
Provision for store
closures and asset
impairments, net 599 371 816 9,586
Operating income 46,482 44,287 86,019 72,257
Interest expense 2,786 1,772 5,572 3,448
Interest income (178) (282) (433) (478)
Income from continuing
operations before income
taxes 43,874 42,797 80,880 69,287
Income taxes 16,377 17,059 30,300 27,523
Income from continuing
operations 27,497 25,738 50,580 41,764
Income (loss) from
discontinued operations,
net of tax - 869 456 (2,119)
Net income $27,497 $26,607 $51,036 $39,645
Earnings per common share:
Basic:
Income from continuing
operations $0.78 $0.69 $1.42 $1.11
Income (loss) from
discontinued operations - 0.02 0.02 (0.05)
Net income 0.78 0.71 1.44 1.06
Diluted:
Income from continuing
operations $0.76 $0.67 $1.40 $1.09
Income (loss) from
discontinued operations - 0.02 0.01 (0.06)
Net income 0.76 0.69 1.41 1.03
Dividends per common share $0.14 $0.14 $0.28 $0.28
Weighted average number of
shares outstanding:
Basic 35,350 37,417 35,553 37,469
Diluted 36,062 38,326 36,252 38,412
Number of stores in
continuing operations,
beginning of period 516 487 510 486
Stores opened 4 2 6 3
Stores acquired 2 6 7 12
Stores closed (1) (3) (2) (9)
Number of stores in
continuing operations,
end of period 521 492 521 492
Number of stores in
discontinued operations,
beginning of period - 13 - 23
Stores opened - - - -
Stores acquired - - - -
Stores closed - (13) - (23)
Number of stores in
discontinued operations,
end of period - - - -
Store relocations - - - 1
Condensed Consolidated Balance Sheets (unaudited)
July 31, January 31, July 26,
2008 2008 2007
Thousands Except Share Information
Assets
Current Assets:
Cash and cash equivalents $26,867 $27,019 $24,463
Accounts receivable, net 433,828 334,972 301,157
Merchandise inventories, net 465,981 510,482 494,473
Deferred income taxes 62,611 64,500 59,985
Prepaid expenses and other current
assets 23,823 22,043 23,280
Assets held for sale 4,173 4,173 4,177
Total current assets 1,017,283 963,189 907,535
Property:
Land 119,312 116,564 113,279
Buildings and leasehold improvements 755,504 725,930 692,893
Equipment and fixtures 645,383 628,556 612,429
Total 1,520,199 1,471,050 1,418,601
Less accumulated depreciation 752,940 715,682 704,086
Property, net 767,259 755,368 714,515
Goodwill 84,394 84,394 84,450
Intangible assets, net 32,350 32,240 25,775
Other non-current assets 11,419 11,525 5,340
Total $1,912,705 $1,846,716 $1,737,615
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable $261,973 $273,953 $270,740
Pharmacy benefits payable 254,273 176,829 123,475
Accrued employee compensation and
benefits 104,350 120,458 120,118
Taxes payable 31,604 58,998 54,383
Other accrued expenses 64,426 63,110 66,769
Current maturities of debt 36,727 36,727 6,727
Total current liabilities 753,353 730,075 642,212
Long-term debt 205,636 183,364 123,364
Deferred income taxes and other
long-term liabilities 100,228 105,352 120,229
Total liabilities 1,059,217 1,018,791 885,805
Commitments and Contingencie
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